A California civil rights agency has sued Tesla, alleging the automaker segregated Afro-American workers to the lowest levels.
The lawsuit, filed by the Department of Fair Employment and Housing on February 9 in the Superior Court of California in Alameda, seeks an injunction, monetary relief, and damages.
"As early as 2012, Black and/or African American Tesla workers have complained that Tesla production leads, supervisors, and managers constantly use the n-word and other racial slurs to refer to Black workers," wrote Attorney Sirithon Thanasombat in the civil rights complaint. "They have complained that swastikas, 'KKK,' the n-word, and other racist writing are etched onto walls of restrooms, restroom stalls, lunch tables, and even factory machinery."
The lawsuit further alleges that a lack of black workers in leadership roles has left many complaints of "rampant racism" unchecked for years.
"These numerous complaints by Black and/or African American workers about racial harassment, racial discrimination, and retaliation lodged over a span of almost a decade have been futile," Thanasombat wrote in the petition. "Defendants turned, and continue to turn, a blind eye to years of complaints from Black workers who protest the commonplace use of racial slurs on the assembly line. Tesla was and continues to be slow to clean up racist graffiti with swastikas and other hate symbols scrawled in common areas."
Tesla disclosed in its December 2020 DEI analysis that its leadership is 83% male and 59% white, but the report did not show whether the statistics included its board of directors and did not enclose an EEO-1 report.
An EEO-1 report lists a company's workforce by race and gender and is collected by the United States Equal Employment Opportunity Commission annually.
Trevor Allen, a sustainability research analyst at BNP Paribas, said at a Future of ESG Equity Investing event that the Social category of Environmental, Social, and Governance (ESG) initiatives, of which racial discrimination is monitored, is the most difficult for investors to come to terms with.
"It's challenging because 'Social' is the most diverse, so it will certainly cover any form of discrimination, and it will also cover workplace safety as well as elements around how corporations actually interact with their communities," Allen said.. "Anytime we see anything like this [lawsuit], it's obviously going to shed more and more light on that."
Tesla relocated its headquarters to Austin last year just as California Gov. Gavin Newsom signed Assembly Bill (AB) 979 into law requiring publicly-held companies headquartered in the Golden State to diversify members of its board of directors, according to media reports.
"What I see going forward is that 'Social' and 'Governance' will become more interlinked," Allen said in an interview. "These two elements will become more crucial for investors as they engage more with the governance of that company, the C-suite, and board around how they're going to run that company financially."
AB 979 requires publicly held companies headquartered in California to include at least one director from an underrepresented community by Dec. 31, 2021, two directors from underrepresented communities for corporations with more than four board members, and a minimum of three directors for corporations with more than nine board members by 2022.
However, the state of Texas doesn't have such a law on its books.
"There's going to be something substantially strange about an ESG score if you have a really high 'Social' score and a really low 'Governance' score or a really high 'Governance' score and a really low 'Social' score, and that's why I see those two categories starting to trend together for companies that are truly going to take a stand around 'Social' action," Allen added.
Tesla did not respond to requests for comment. A denial is posted online.